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Bank aus Verantwortung
Geothermal Development Facility (GDF)The First Multi-Donor Climate Initiative to Promote Geothermal Energy in Latin America
IRENA Workshop on Financing Geothermal Development in the AndesBogotá, Colombia, September 22nd & 23rd 2015
Geothermal Energy Exploratory risk acts as a serious impediment
Source: ESMAP 2012
Significant investment cost for exploratory drillings at considerable risk before
success of project is secured
Public and private investors shy away from
making the respective investments
Public Risk Mitigation Mechanisms are playing a key
role in the development of Geothermal Energy worldwide
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
A successful reference: GRMF East Africa – Progress Report
20 Mio. €EU-ITF
Grants for Surface Studies & Exploration Drillings; Continuation
Premium; Regional Database
Private/Public
Investor
30 Mio. €
Private/ Public Investor
Tremendous interest during the first three Calls for Proposals
1st Call for Proposal 2012/20139 applications from 5 countries resulting in 4 Grant Agreements
2nd Call for Proposals 2013/20148 applications 7 countries resulting in 4 Grant Agreements
3rd Call for Proposals 2014/201516 Expressions of Interest from 5 countries received, evaluation ongoing
www.grmf-eastafrica.org
Successful Approach to incentivize Project Development
Further calls for proposals to come !!
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
GBP 47 Mio.
Why not adapt a successful approach to Latin America?
GDF Geothermal
Development Facility Latin America
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
Latin America has shown strong interest in the GDF…
› Considerable geothermal potential along pacific coast.
› High interest of Governments, Utilities and Project Developers in Risk Mitigation Instruments and tailored Financing in order to exploit the potential.
› Strong interest from Donors and Financiers as well as Regional Organisations in supporting the GDF for Latin America.
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
Geothermal Development Facility – OverviewStakeholder Group
Risk Mitigation Fund Grants for Surface Studies /
Contingency Grants for Exploratory Drilling
Technical Assistance Forum
Policy Dialogue; Coordination of existing Programs; Execution of TA funds
Bridge / Investment Financing Lines
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
manages
oversees
Geothermal Development FacilityTechnical Assistance Forum
Technical Assistance Forum(annually in framework of existing event)
Policy Dialog & Coordination of existing and planned Programs
Execution of TA Funds provided by donors with no implementing capabilities
Board of Directors – TA-Committee
Fund Manager Funds provided for
TA-Activities
Existing and planned TA-Programs
(“in kind”)
Geothermal Development Facility - Copyright © KfW Entwicklungsbank 7
Third Donors
Drillings
GDFBridge Financing Lines
–Capacity Drillings
0 1 2 6 7 8
GDFInvestment
Financing Lines –
Plant Infrastructure
GDFRisk
Mitigation Fund
–Contingency
Grant
3 4 5 10 11 129
Capacity Drillings
Geothermal Development Facility
Preparation ConstructionExploration Drillings
GD
F G
rant
s -
surf
ace
stud
ies
Exploration Risk
A tailored approach to promote Geothermal Development
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
Geothermal Development FacilityRisk Mitigation Fund – Grant for Surface Studies
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
Project Developers (Public/Private/PPP)
Application GDFRisk Mitigation Fund –Grant for Surface Studies
Successful Evaluation
Grant for Surface Studies Financing of up to 40% of the cost
of respective activities up to a maximum of EUR 0,6 Mio.
Surface StudiesIdentification &
Preparation Activities
Geothermal Development FacilityRisk Mitigation Fund – Contingency Grant
Application GDFRisk Mitigation Fund –
Contingency Grant
Exploration successfull
Repayment of 80% of the funds received – refinancing through
Bridge / Investment Financing Lines
Successful Evaluation
Exploration Drillings
Exploration unsuccessful – no
financial commitment
Project Developers (Public/Private/PPP)
Contingency Grant Financing of up to 40% of the
cost of exploration drilling of up to 3 wells up to a maximum of
approx. EUR 6 Mio.
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
Drillings
GDFBridge Financing Lines
–Capacity Drillings
GDFInvestment
Financing Lines –
Plant Infrastructure
GDFRisk
Mitigation Fund
–Contingency
Grant
0 1 2 7 83 4 5 10 11 1296
Capacity DrillingsPreparation ConstructionExploration Drillings
Geothermal Development FacilityContingency Grant must be repaid according to predefined rules; repayments may be refinanced through Bridge Financing or Investment Financing Lines
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
Geothermal Development FacilityRisk Mitigation Fund – Eligibility
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
› Public, private or PPP developers
› Projects in Bolivia, Chile, Colombia, Costa Rica, Ecuador, El Salvador,
Guatemala, Honduras, Nicaragua, Peru
› Stringent technical and financial criteria as in the case of GRMF East Africa:
› Technical & financial background and experience of the developer
› Quality of project preparation (studies, permits, EIA, etc.)
› Viable business case (grid connection, PPA, etc.)
One project per developer per country per application round per instrument
Identification & Preparation (1) Exploratory Drilling (2)
Production (4)
Locate and Assess a Prospect• Desktop Data Research and
Analysis• Regional Reconnaissance• Geology and Geochemistry
Resource Studies• Historical Drilling Data• Infrastructure Availability
Assess Lease and Permits• Land Acquisition• Land Use Laws• Contact Federal Agencies• Water Rights• Mineral Rights• Environmental Review
Establish Baseline Business Model• Physical and baseline economic
viability testing and modeling• Resource expectations baselines• Project scale baselines• Electric market analysis• Land use costs• Land use limitations (conservation,
PR, NIMBY, etc.)• Grid compatibility, interconnection
costs
District Exploration:• Geochemical Analysis• Geophysical Survey
Prospect Exploration:• Exploratory temperature gradient
drilling• Resource measurement
Permitting:• Permitting applications/procedures
for exploration• Environmental Impact Statement for
exploration
Re-evaluate Business Model• Site, scale and technology choice• Generation potential revisions• Feasibility Analysis
Design and estimate cost of well• Design Characteristics• Geological Structure• Predicted Drilling Curve• Extent of Engineering Requirements
Permits• Drilling Permits • Environmental Impact Statement for
drilling• Water Reinjection
Assemble equipment and crew• Market Fluctuations with Oil and Gas• Crew availability• Rig Cost and Maintenance• Daily rate of other equipment
(Compressors, Bits, Blowout Preventers, etc.)
Drill, test and complete the well• Reservoir Management• Casing• Pumps
Obtain Financing• Complete Power Purchase
Agreement• Bankable Geothermal Reservoir
report• EPC Contract
Preliminary Facility Design• Equity Constraints• Geophysical Constraints• Temperature and Salinity
depreciations
Permitting• NEPA, NPDS, CAA• USFWS, BLM, FERC
EPC Manufacture
EPC Construction
Source: Deloitte. (2008) / Rödl & Partner
Geothermal Development FacilityRisk Mitigation Fund – Overview Activities
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
Geothermal Development FacilityRisk Mitigation Fund – Eligible Activities
Identification & Preparation (1) Exploratory Drilling (2)
Production (4)
Locate and Assess a Prospect• Desktop Data Research and
Analysis• Regional Reconnaissance• Geology and Geochemistry
Resource Studies• Historical Drilling Data• Infrastructure Availability
Assess Lease and Permits• Land Acquisition• Land Use Laws• Contact Federal Agencies• Water Rights• Mineral Rights• Environmental Review
Establish Baseline Business Model• Physical and baseline economic
viability testing and modeling• Resource expectations baselines• Project scale baselines• Electric market analysis• Land use costs• Land use limitations (conservation,
PR, NIMBY, etc.)• Grid compatibility, interconnection
costs
District Exploration:• Geochemical Analysis• Geophysical Survey
Prospect Exploration:• Exploratory temperature gradient
drilling• Resource measurement
Permitting:• Permitting applications/procedures
for exploration• Environmental Impact Statement
for exploration
Re-evaluate Business Model• Site, scale and technology choice• Generation potential revisions• Feasibility Analysis
Design and estimate cost of well• Design Characteristics• Geological Structure• Predicted Drilling Curve• Extent of Engineering
Requirements
Permits• Drilling Permits • Environmental Impact Statement
for drilling• Water Reinjection
Assemble equipment and crew• Market Fluctuations with Oil and
Gas• Crew availability• Rig Cost and Maintenance• Daily rate of other equipment
(Compressors, Bits, Blowout Preventers, etc.)
Drill, test and complete the well• Reservoir Management• Casing• Pumps
Obtain Financing• Complete Power Purchase
Agreement• Bankable Geothermal Reservoir
report• EPC Contract
Preliminary Facility Design• Equity Constraints• Geophysical Constraints• Temperature and Salinity
depreciations
Permitting• NEPA, NPDS, CAA• USFWS, BLM, FERC
EPC Manufacture
EPC Construction
Source: Deloitte. (2008) / Rödl & Partner GD
F R
isk
Miti
gatio
n Fu
nd –
Gra
nts
for
surf
ace
stud
ies
GDFRisk
Mitigation Fund –
Contingency Grant
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
Geothermal Development FacilityRisk Mitigation Fund – Application Process
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
Information Stage
Pre-qualification Stage
Application Stage
Evaluation Stage
Ranking Stage
Signing Stage
Completeness checkGrounds for rejection Evaluation methodology ThresholdQ&A for clarification
Communication of GDF design and application procedureConferences / Flyer International procurement sites
Mandatory pre-bidding workshop Q&A for clarification
Completeness checkGrounds for rejectionOne formal deficiency report Evaluation methodology Threshold score
Ranking by technical evaluation score
ToolsStages Procedure
Information workshop
Request for EoI
Expressions of Interest
Ranking
Evaluation of EoI
Pre-bidding workshop
Accepted
Evaluation
Drilling ProgramsSurface Studies
Applications
RejectedDeficiency report Formal omissions
Supplements
Accepted
Drilling ProgramsRank 1 to x: Funding
Surface StudiesRank 1 to x: Funding
Rank > x:Next application round
Rejected
Grant offered
Grant contract signedRejected
› Drilling success will be defined as X MWe output per geothermal well.
› Clear guidelines concerning testing procedure performed by Fund Manager,
who monitors the execution and sampling & analysis of the fluid:
If measured well output is below X MWe or if due to the chemical
composition of the geothermal fluid, the exploitation of the geothermal fluid
is deemed commercially infeasible the drilling is deemed unsuccessful -
no other reasons problems (commissions, missing PPA, etc.) are relevant.
› Clear go / no-go decision based triggers indemnification or repayment.
Geothermal Development FacilityRisk Mitigation Fund – Drilling Success Definition
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
Geothermal Development Facility
› Develop an affordable, clean, base-load capable technology
› Provide at least USD 75 million in tailored Risk Mitigation Instruments
› Provide at least USD 1 billion in tailored Bridge- and Investment Financing
› Generate at least 50 Mio. tonnes of CO2 emission savings
› Provide clean energy to at least 2 Mio. people in the region
Summary
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
Joint Launch at COP20 in Lima on December 8th 2014
EU Commissioner Arias Cañete, German Federal Minister Dr. Müller and representatives of 12 donors and financiers launch GDF
as the 1st initiative to promote geothermal on a continental scale:Set-Up of Risk Mitigation Fund by Q2 2016First Call for Proposals during Q3 2016
Bridge- and Investment Financing Lines available from 2016 on
Geothermal Development Facility - Copyright © KfW Entwicklungsbank
Bank aus Verantwortung
Thank you for your attention!KfW Development Bank
Dr. Christoph Sigrist Jens Wirth
Head of Division Project ManagerEnergy and Financial Sector Energy and Financial Sector Latin America & Caribbean Latin America & Caribbean KfW Entwicklungsbank KfW Entwicklungsbank
+49 69 7431 – 3719 +49 69 7431 – [email protected] [email protected]